Weakened by recession, charities face uncertain future

TheGlaobeandMail.com – National – Umbrella group finds 22 per cent of charities at risk because of economic downturn
Published on Wednesday, May. 05, 2010 . Last updated on Thursday, May. 06, 2010. Paul Waldie and Tavia Grant

The recession has prompted a transformation in Canada’s charitable sector, with many non-profits either shutting down or considering mergers to stay afloat.

In recent weeks, Smart Growth B.C., a Vancouver-based charity that had 12 employees and $800,000 in annual revenue shut down, and in December, the Canadian Policy Research Networks, an Ottawa-based think tank, closed after 15 years in operation.

“The timing of [expansion] combined with the recession just made it too hard for us to dig out of where we were financially,” said Bob Ransford, former president of Smart Growth, an environmental group that promoted sustainable communities.

A recent survey of 1,500 charities by Imagine Canada, a national umbrella body, found that 22 per cent said they were at risk because of the economic downturn. Just under half said they were having difficulty fulfilling their missions.

“If these charities start to fold … the quality of life in Canadian communities will suffer,” said Cathy Barr, co-author of the report and Imagine Canada’s director of research.

The economic downturn hit many charities several ways. Individual donations dried up as donors cut back, foundations slashed grants as their endowment funds shrank, and governments pulled funding to cope with rising deficits.

The drop in foundation grants has been particularly severe. For example, thousands of small and mid-sized charities depend on funds from Canada’s 170 community foundations. Last year, many of those foundations reduced their grants and some stopped granting altogether. Overall funding from community foundations fell by $25-million in 2009 to around $140-million, according to figures from Community Foundations Canada.

That hit groups like the Georgia Strait Alliance in Vancouver, which gets more than half its annual budget from foundations, and saw revenue fall by about 20 per cent last year. “We had to make some dramatic cuts,” said Christianne Wilhelmson, the Alliance’s executive director. The cuts included laying off five of 11 employees.

Most foundations plan to ramp up granting this year thanks to improved financial markets that have helped endowment funds get back close to 2007 levels. But many foundations remain cautious and say they won’t come close to meeting the needs of the charities they finance.

“I think the crunch is coming,” said Glenn Stresman, executive director of the Windsor Essex Community Foundation, which suspended most grants last year. The foundation plans to resume full granting this year, which is around $150,000 annually, but it will be lucky to fund one third of the applications it has received. “There is going to be some difficult times for some charities,” he said.

To cope with the changing financial circumstances, many charities are considering merging or sharing administrative functions. About 12 per cent of charities surveyed by Imagine Canada said they were exploring mergers.

“I happen to be one of the people who believe that strategic alliances are important in any case and this crisis just accentuates that,” said Margaret Mahan, executive director of Better Environmentally Sound Transportation, a Vancouver-based charity that has lost half its funding in the past three years because of cuts in government grants.

“We are, as separate entities, not on a scale that allows for effective use of funding,” added Ms. Mahan, who expects a rash of charity mergers and closings in the next few years. “It’s going to be an interesting time of consolidation.”

Canada has more than 150,000 charities and non-profit groups (the main difference is that charities issue tax receipts for donations, non-profits cannot).

“There’s too many,” said Peggy Cunningham, dean of Dalhousie University’s Faculty of Management, who has researched the sector and sat on numerous charitable boards. “There’s just so many focused ones with subtle nuances in the kinds of causes … some amalgamation in the sector and saving costs … would be a good thing. Any sector crisis can sometimes force people to change their thinking.”

Sheila Wisdom, executive director of the United Way of Windsor-Essex County, does not agree that there are too many charities, but says they need to work differently. The Windsor United Way has changed the way it makes grants because its donations have been cut in half over the past nine years. Instead of funding individual charitable projects on a case by case basis, the United Way is targeting strategic objectives and pushing charities to work together.

“This is not about saving organizations. This is about actually making change on social issues,” she said. “All these [charitable] organizations started because they wanted to help someone in need, because they saw a gap. And so, given the reality of fewer dollars, how do we work differently so that we continue to do that? That’s the question that we’ve been asking ourselves.”